New Commercial Realities
Faced with a changing healthcare environment and the prospect of diminishing commercial returns, pharmaceutical companies must undertake a fundamental and systemic rethink of their commercial operations. This article highlights the key implications of the changing healthcare environment for pharmaceutical commercial operations, and links to a detailed and actionable approach for implementation of new commercial models that considers future roles & competencies, governance and organisational structure and size.
Pharmaceutical markets are undergoing fundamental change
The blockbuster era is over for the pharmaceutical industry. The changing healthcare environment with increased cost-pressure is changing the game, rewarding innovative medicines whilst limiting the prospects for me-too drugs. Although Primary Care currently represents almost two-thirds of global market share, market growth is predominantly being driven by Secondary Care. In order to take full advantage of this environment, big pharma needs footprints in both Primary and Secondary Care markets.
Pharmaceutical companies must adapt to changing commercial realities
For decades, pharmaceutical commercial strategies were based around engaging a well-defined and limited set of stakeholders – primarily prescribers – in a sales process based on 1-to-1 transactional relationships. This is no longer the case. Decision-making processes are more complex, involving more stakeholders influencing at different levels. And the picture differs markedly for Primary Care and speciality products.
Primary Care – limited scope for innovation; evolution toward a service proposition
New Primary Care products are unlikely to demonstrate the degree of innovation that justifies first line indication(s) and premium pricing. Recognising this, pharmaceutical companies are moving ‘beyond the product’ towards holistic healthcare solutions that focus on improving overall patient outcomes, such as development of patient management programmes. This new Primary Care service proposition involves a whole new ecosystem of providers along the care and service continuum, and companies seeking to implement this proposition will need to manage the diverse range of stakeholders spanning treatment pathways and brand lifecycles.
Secondary Care – demonstrating the value of medicine
Demonstrating the economic value of treatment to secure market access is the key single success factor for a speciality care product, and needs to be considered early in development with a continuous focus throughout the lifecycle.
The two key dimensions of healthcare value are i) the overall cost burden (direct and indirect) to society and ii) the overall ability to differentiate and add value (clinical and others) versus current standard (Figure 1). Therapy areas with high cost burden and limited scope for differentiation will show similar dynamics to Primary Care markets with high focus on cost reduction; meanwhile therapy areas with greatest potential for innovation (typically high unmet need) are more likely to support premium pricing of products that demonstrate differentiation and expected benefits.
Changing customer dynamics are driving new commercial realities
The increasing importance of health economics in achieving market access is impacting customer dynamics in both Primary and Secondary care, shifting the emphasis from prescribers towards patients, payers and HTAs.
These changing customer realities will have a significant impact on the future commercial capabilities required by the pharmaceutical industry. Table 1 summarises these capabilities and their relevance in the evolving stakeholder landscape. The specific mix and content of these capabilities will depend primarily on the nature of their business and the key stakeholders involved, and will differ significantly across therapy areas and product lifecycles.
Implementation of new commercial realities demand new organisational realities
Future commercial organisational structures will change in number of ways to accommodate the new market environment.
i) Roles required to accommodate future capabilities along with enabling skills and tools
New roles will be centred on key stakeholders with mechanisms in place to enable team working, sharing of best practices and consistency in approach. Functions housing these roles need to be sized appropriately. There will be a continued and accelerated trend towards downsizing sales forces, especially in Primary Care, driven by a shift in focus from achieving competitive share of voice towards supporting and servicing providers. These new roles include:
1 Health Managers (applicable to both Primary and Secondary Care) responsible for maintaining relationships with payers and national government and health officials. These are relatively senior roles involved in lobbying and negotiating for market access and reimbursement, and maintaining close relationships across national healthcare systems.
2 Key Account Managers (predominantly Secondary Care) typically responsible for key accounts (in the case of specialist products) and the local implementation of market access strategy with regional and local payers and health authorities.
Sizing of the functions housing Health Managers and Key Account Managers should be based on:
i) Ensuring full coverage of these institutions.
ii) Deciding on the appropriate span of control based on bottom-up activity plans and workload
The ultimate requirement will vary by country, depending upon the number of accounts and the extent of decentralisation of care. Indicative country-level representation would be expected to number a few tens rather than hundreds.
3 Sales Specialists (applicable to both Primary and Secondary care) have perhaps the closest similarity to the traditional sales rep model. Sales Specialists will be responsible for direct product selling, and will also be expected to provide detailed product information as well as ongoing service, support and education to providers.
In terms of sizing of the sales function, for Secondary Care the existing target base is already relatively small therefore we do not anticipate large changes in scale, although further reduction may arise as a consequence of an increasing focus in rare or orphan diseases.
Sales forces in Primary Care indications have been the major casualties of recent layoff waves. Historically, sales force numbers were predicated on high frequency of physician visits to achieve high share of voice. Assuming a reduced frequency of visits going forward, organised around the practice planning cycle, we believe existing Primary Care sales forces could endure further and deeper cuts, by as much as two-thirds.
4 Patient Liaisons (predominantly Secondary Care) is a relatively new requirement that has emerged in recognition of the growing importance of patients as a key customer group.
In terms of scale, Patients Liaison roles are likely to be small in number, with dedicated individuals within each therapy area being responsible for developing intimate knowledge of patients and their needs for specific diseases. At present, activities around the use of social media for developing patient communities are very much lone efforts.
Governance structure and accountabilities
To mirror the evolution towards patient-centred healthcare provision and the provision of value at the treatment pathway level we advocate organisational structures that are aligned around therapy areas, with all functions having reporting lines, direct or dotted, to the heads of therapy area business units.
A single function with full accountability for developing integrated commercial strategies for therapy areas and their brands across payers, providers and patients ensures consistent implementation across customers and channels. Obvious candidates for this role are existing Therapy Area/Brand Managers, although such a role would involve a shift from traditional marketing to encompass the traditional sales domain. The role would be expected to assume responsibility for overall investment decisions and for tracking and monitoring overall performance. This structure would also enable future reward structures for marketing to be more closely linked to commercial performance than at present.
Supporting functions, reporting and synergies across therapy areas
Organising on the basis of therapy area/treatment pathway will require specialisation across several dimensions, to achieve sufficient understanding of the underlying science, health economics and the specific needs of relevant stakeholders. While this makes it difficult to create individual customer facing roles that can be shared across different business units, it may be beneficial to house analogous roles directly or indirectly within dedicated Centres of Excellence, which are effective means of ensuring standardisation and consistency in methodologies and approaches, and of sharing best practices across business units.
Across most countries, there is a clear trend towards regionalisation of healthcare. Whilst policies are formulated and agreed at national- or supra-national level, the responsibility for implementation is increasingly being devolved to the regional level. For pharmaceutical companies, this provides increasing rationale for customer facing roles (or at least those interacting with payers and authorities) to be regionally aligned. This places greater emphasis on the ability of supporting functions to meet local customer needs.
Global versus local organisations
With a growing emphasis on cost reduction, pharmaceutical companies are increasingly seeking opportunities to create organisational synergies. The interfaces between global, regional and local entities represent significant opportunities in this regard. We believe that there are many opportunities to centralise supporting functions such as market research, analytics, medical affairs, training and HEOR at regional and global levels, with estimates of savings in the range of 50% being achievable.
Embracing the new commercial realities
Transforming commercial models to operate within the new healthcare environment is not an option for pharmaceutical companies; it is an imperative.
Neither is it a tactical or fine-tuning exercise, but rather a fundamental shift to build a platform for future growth. Successful implementation will require a carefully planned and comprehensive review of the organisation and the involvement of a variety of different stakeholders at all levels throughout the organisation.
About the Authors
Jean-Francois Delas is a Vice President at Kinapse Ltd. and leads the Marketing & Sales Consulting Practice.
Stephen Mayhew is a Manager in the Consulting Practice at Kinapse Ltd. He consults to the life sciences industry in valuation, deal-making and asset and portfolio management.
Kinapse provides consulting and outsourcing services to the life sciences industries, globally.
Our mission statement is: ‘Collaborating with our clients to innovate for exceptional results’. Kinapse clients include many of the world’s leading pharmaceutical, biotechnology, medical device and specialty pharmaceutical companies, government organisations and life sciences service providers.
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